Debt Validation Letters: Fight Debt Collection Scams

A debt validation letter is a great tool to use if you’re worried you’re dealing with a debt collection scam.

You’re legally entitled to a written letter explaining the debt you owe within five days of a debt collector contacting you.

If you discover you’re dealing with a debt collection scam, it’s important to report the scammer to the Consumer Financial Protection Bureau (CFPB) or to your state’s attorney general’s office to protect other consumers from falling victim to their predatory practices.

The phone calls, emails, and letters won’t stop coming. You’re being pursued aggressively by a debt collector, but you’re confused. Perhaps you thought you already paid off the debt in question. Maybe you thought the debt was past the statute of limitations on collectability. Or, perhaps you have no clue what debt this collection agency is referring to in the first place, and you think you might be dealing with a scam.

The best way to verify a debt that a collector is attempting to retrieve from you is through a debt validation letter. Below, we’ll explore everything you need to know about debt validation letters, from why they’re important to how you can acquire one.

How to Spot a Debt Collection Scam

When you have a bill, loan, or other debt obligation that is past due, the original creditor can attempt to collect it, or they can hire a third-party debt collector to attempt to collect it from you on their behalf. Unfortunately, however, the debt collection industry is rife with scams, meaning it can often be difficult to determine whether you’re dealing with a legitimate debt collector or not.

You feel pressured to pay by money transfer or through a prepaid credit card.

The debt collector is withholding information from you (such as the name of the creditor or the amount you owe).

The debt collector falsely claims to be a lawyer.

You’re falsely threatened with jail time.

The debt collector uses profanity.

The debt collector says they’ll get in touch with your family members, friends, or colleagues.

Know that debt collectors cannot contact you at inappropriate times, meaning they can’t get in touch with you before 8 a.m. or after 9 p.m., and they cannot contact you at your place of work.

It’s important to never make a payment on a debt until you’ve verified that it’s legitimate, which means the debt is legally collectable and it isn’t past the statute of limitations on collectibility. Also, the CFPB notes that you should never, under any circumstances, give out any personal financial information (such as bank account numbers) until you’ve verified that the debt in question is legitimate.

What Is a Debt Validation Letter?

One way you can verify that you’re dealing with a legitimate debt collector is by requesting a debt validation letter, which asks the debt collector to prove the debt in question. Debt validation letters put the responsibility on the debt collection agency to verify the debt they claim you owe.

Under the Fair Debt Collection Practices Act (FDCPA), a debt collector has to provide you with written proof of your debt within five days of initially contacting you, according to the CFPB. This written notice must include the name of the original creditor, the amount you owe, notice that you are legally able to dispute the debt, and notice that you’re legally able to request the name and address of the original creditor.

If you send the letter within 30 days of initially being contacted by the collection agency, they have to provide you a debt validation letter before they can resume their collection efforts, according to the Federal Trade Commission (FTC).

How Can I Request a Debt Validation Letter?

If you think you are dealing with a scammer or an illegitimate debt, you should send a letter to the debt collector asking for verification of your debt.

The first step is to ask for the debt collector’s name, address, and a callback number (as well as an account number, if applicable) when they first contact you. Then, you should send a written letter to the debt collector asking for the name and address of the original creditor, the amount and age of the debt, and details about the debt collector’s authority to collect this debt.

The CFPB offers a sample letter you can use, which outlines exactly what you should ask for. Although there are several sample letters on their website, if you’re looking to validate your debt, you should click on the one that says, “I need more information about this debt.”

What Should I Do After I Ask for a Debt Validation Letter?

Once you receive a response from the debt collection agency, you should take the following action.

If the debt collector is fraudulent: Report them immediately.

You can either file a complaint with the CFPB or with your state’s attorney general’s office. It’s important to report the scammer so that you can prevent them from trying to collect illegitimate debts from other consumers.

If the debt collector is legitimate: Settle your debt as quickly as possible.

In the event that your debt is legitimate, you should focus on paying it off as quickly as possible, as unpaid debt can wreak havoc on your credit. Here are three ways you can settle your debt once and for all.

Negotiate with the creditor or debt collector. You can negotiate with debt collectors, so this is always a good first step to take. Most debt collectors will be willing to negotiate at least part of the debt down, as they’re more inclined to take something rather than nothing at all.

If you don’t have enough money in savings to cover the debt — even after negotiating it down to a lower amount — consider one of the following strategies:

Debt consolidation. One way to pay off debt is through debt consolidation. This involves combining all of your debt (if there is more than one form), taking out a personal loan, and then paying off your consolidated debt using that personal loan. You should only consider this option if the interest rate you secure on a personal loan is lower than the interest rate on your debt.

Check Your Credit Report

If the debt collector in question was fraudulent, you’ll want to check your credit report to ensure nothing was improperly reported, which could affect your credit score. If you notice any errors on your credit report, you should dispute them.

As a consumer, it’s important to be alert and informed so that you can avoid dealing with potential scammers. By playing an active, rather than passive, role in your financial life, you can rest assured knowing you’re doing everything possible to ensure your finances are in top shape.

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Risa writes on a variety of personal finance topics for Novi Money, with a special expertise in savings, retirement and debt management. She is a CERTIFIED FINANCIAL PLANNER™ and holds an MBA from Darden School of Business at the University of Virginia. Her mission is to help smart people be smart with their money so they can live well and do well.